Tax Tips
We encourage all of our clients to plan for their taxes. To help with that process we have listed some tips below that will help you with that process. (Note: Tax law is complicated. The items below are listed for discussion points only. To find out if any of the items will reduce your taxes, please give us a call).
- Ways your children can save you tax dollars:
- You are allowed an exemption deduction of $3,650 per child.
- A $1,000 tax credit is allowed for each child under 17.
- Take advantage of the dependent care credit for children under 13.
- Send your children to college and take a tax credit of up to $2,500 for tuition and related expenses or deduct up to $4,000 in tuition or fees from your taxable income.
- Deduct up to $2,500 in student loan interest.
- Consider starting an educational saving plan. Contributions are not tax deductible but earnings grow tax free.
- Hire your children and pay them up to $5,700. You will get a $5,700 business deduction. As long as this is the only money the child makes they will not have to file a tax return.
- Adopt a child and take advantage of the adoption credit.
- Ways your home can you tax dollars:
- Save energy dollars as well as tax dollars by making energy improvements to your home. A tax credit is available for 30% of the cost your improvements. The maximum credit is $1,500. Examples of energy saving improvements are: skylights, windows, outer doors, water heaters, air conditioners and biomass stoves.
- Don't miss deducting the real estate taxes paid on your residence. Real estate taxes are deductible whether you itemize or not.
- The interest paid on your principle home and 2nd home is an itemized deduction. A 2nd home includes travel trailers.
- Points are an itemized deduction for the full amount paid in the year you purchase your home. If you refinance the points are deductible ratably over the life of the loan.
- If your home was purchased after December 31, 2006 you are allowed an itemized deduction for the mortgage insurance premiums.
- Itemizing deductions can save you tax dollars:
- Keep tabs on all out of pocket medical costs. Make sure to include prescriptions, doctors, dentists, hospitals, nursing homes, health and long-term care insurance, lodging and transportation.
- Keep track of the sales tax paid on large purchases. You can deduct the larger of state income taxes paid or sales taxes paid.
- Keep your receipts for all your cash and non cash donations. If you were a volunteer keep track of your out-of-pocket expenses as well as the miles driven for a charitable cause.
- Keep a log of all your unreimbursed employee expenses. These expenses usually include lodging, mileage and office equipment.
- Keep a log of all your gambling losses. These losses are deductible to the extent of winnings. You never know when you might win big.
- Save for retirement and save tax dollars:
- Contribute to a regular IRA. You get a deduction today that will not be taxed until you make a withdrawal.
- Contribute to a Roth IRA. The contribution will not be deductible but the earnings will grow tax free.
- If your income is below $53,000 you may be eligible for a retirement savings credit. This credit may make the prospect of investing in an IRA more attractive.
- Consider opening a Health Savings account. These accounts allow you to get a tax deduction for saving money for medical costs. You can use the savings in the account to pay for current medical expenses or let the account grow tax free and use them after you retire.